Intellectual Property Rights Exclusion and Trademark Infringement Action
The insured corporation brought an action against the business liability insurer, seeking reimbursement for costs in defending trademark infringement action. This case is Marvin J. Perry, Inc. v. Hartford Casualty Insurance Company, 412 Fed.Appx. 607(2011).
Marvin J. Perry, Inc. contended that its insurer, Hartford Casualty Insurance Company breached its contractual duty to provide a defense in an action brought against Perry; in the underlying suit against Perry, P&W alleged unfair competition by infringement of common law rights. Hartford asserted that an exclusion in the policy relieved it of any duty to defend. The United States District Court for the District of Maryland entered summary judgment for the insurer and this appeal followed.
The appeals court applied Maryland law and noted that Maryland does not follow the rule that insurance policies should as a matter of course be construed against the insurer. To determine the intention of the parties to the insurance contract, the court said that it must construe the instrument as a whole.
Perry argued that the complaint alleged an unfair competition cause of action that arose from its internet marketing activities, thus qualifying as an advertising injury, and that the complaint did not arise from a violation of P&W's intellectual property rights and so did not fall under the policy's intellectual property rights exclusion. The facts showed that Perry transferred its furniture dealing business to P&W and this transfer included the trade name “Marvin J. Perry & Associates”. The problem was that Perry updated its website and removed all contact information for P&W, operating as Marvin J. Perry & Associates, and substituted contact information for Perry as if it was the business trading as Marvin J. Perry & Associates. P&W complained that this was an attempt to deceive purchasers into believing that they were purchasing the goods and services from Perry when in fact, the business belonged to P&W.
In seeking coverage from Hartford , Perry said that P&W was concerned with how the style of advertising, rather than the use of the trademark “Marvin J. Perry & Associates”, deceived consumers into thinking the two businesses were one entity. Specifically, Perry contended that P&W's complaint asserted a claim for unfair competition arising out of Perry's use of a website to advertise in the same style as P&W. However, the court said that this contention is belied by the clear language of the complaint indicating that P&W was concerned with how Perry was attempting to deceive purchasers by the use of the name “Marvin J. Perry & Associates”. The complaint made clear to the court that the reason the web presentation was potentially confusing to customers was because the trade name “Marvin J. Perry & Associates” and trademarked logo containing the same were utilized throughout the website. In other words, the complaint arose out of concern about confusion in the market, making it appear to customers that Perry was doing business under P&W's trade name and that Perry owned the website. This market confusion gave rise to P&W's unfair competition claim.
The appeals court ruled that the underlying complaint was about an infringement on the right to use the trade name “Marvin J. Perry & Associates”. This independent unlawful conduct caused P&W's business injury and it is based on Perry's use of its trade name, trademark, logo, and website in violation of P&W's registration and ownership of that name and mark. As such, any allegation of unfair competition would necessarily be excluded from coverage as a claim arising out of any violation of any intellectual property rights, such as trademark, trade name or other designation of origin or authenticity. The intellectual property rights exclusion relieved Hartford of its duty to defend. The ruling of the district court was affirmed.
Editor's Note: The United States Court of Appeals, Fourth Circuit, held that the Hartford policy clearly and unambiguously excluded coverage for advertising injury arising out of any violation of any intellectual property rights, such as patent, trademark, trade name, trade secret, service mark, or other designation of origin or authenticity. The insured's actions caused a complaint against it arising out of trademark or trade name violations and the exclusion prevented any coverage.